Archive for the ‘Energy’ Category

TysonCNBCRecently I appeared on CNBC to discuss whether to lift the 39-year old ban on exporting US produced crude oil. Ending the ban is bad policy for 5 reasons.

I. Allowing the export of crude oil will raise gasoline prices for American consumers. As I’ve argued before, while the oil boom can’t lead to affordable energy for Americans, it has led to a very slight discount for US refiners, which in turn lowers gasoline prices just a tad.

II. It doesn’t make sense to start exporting crude oil when we’re still importing 7.6 million barrels of oil every day, and we’ll continue to be dependent on imports for a long time.

III. Exporting crude will provide incentives to produce more oil, further straining environmental concerns from fracking and deepwater drilling, and exacerbating the impacts of global climate change from its overseas consumption. While we are currently exporting record amounts of refined petroleum products like diesel and gasoline, allowing the export of the raw crude oil will significantly increase the rate at which we export domestically produced oil. That’s because right now crude oil producers must first ship their product to a refiner, where it can take a while to turn the crude into end products. Allowing for direct crude exports will allow producers to bypass the refineries altogether, and will expand the number of export ports from which to unload the crude.NA-BZ765_OILEXP_G_20140122181803

IV. Crude oil exports won’t be effective as a diplomatic tool to counter influence of, say, Russian or Saudi energy exports because the United States simply lacks adequate spare capacity to meaningfully dilute those countries’ dominance over certain markets.

V. Focusing on whether to export crude oil or not misses the larger point: we can’t have this debate in a vacuum separate from the need to establish a national energy and climate policy that comprehensively establishes a clear path for consumers to enjoy access to affordable, reliable and sustainable energy for generations to come.

Tyson Slocum is Director of Public Citizen’s Energy Program. Follow him on Twitter @TysonSlocum

Yesterday we joined with our friends The Utility Reform Network and the National Consumer Law Center to protest a motion by a group of power plant owners and Shell Oil to increase household electric utility bills by millions of dollars in California. Here’s the deal: just as Public Citizen predicted, the fracking boom does not guarantee cheap natural gas, as prices skyrocketed from December to February with the cold weather snap. Because natural gas fuels 27% of electricity production, that means some generators saw their costs increase. Under complex reliability rules, some of these generators and power marketers claim they haven’t been able to recover all of their costs in the marketplace, and petitioned the Federal Energy Regulatory Commission for an emergency waiver from market rules to allow them to recover 100% of their rising natural gas costs.Shell As we point out, this proposal shifts all the risk away from the owners of power plants an onto household consumers, while at the same time allowing these same generators to pocket excess profits should gas prices fall. But the really outrageous component of this brazen plan is that one of the petitioners is Shell Energy, a major seller of electricity in the marketplace. We write: “Shell Energy’s inclusion as one of the suppliers seeking the emergency waiver is particularly egregious because of Shell’s unique role as a global leader in natural gas production. Shell Energy’s parent company, Royal Dutch Shell plc, is one of the largest natural gas producers in the world and in the U.S. It is outrageous that an affiliate of such a major natural gas producer seeks relief from perceived high natural gas prices—particularly when affiliates of Shell Energy are enjoying stronger profits from the increased natural gas prices from sales of gas produced from thousands of Shell’s drilling wells.” In addition, affiliates of other suppliers requesting the emergency waiver are also sophisticated energy price hedgers, with companies like NRG and Dynegy veterans of dealing with natural gas fuel price volatility through the years, including the 2000s. And some of the owners of La Paloma, notably the investment banks Morgan Stanley & Credit Suisse, are among the most erudite proprietary financial traders of natural gas contracts in the world, and should therefore be quite capable of managing commodity price risk. We demand that FERC reject this outrageous request to shift big energy company’s risks onto working families utility bills.

Tyson Slocum is Director of Public Citizen’s Energy Program. Follow him on Twitter @TysonSlocum

We just filed a protest at the Federal Energy Regulatory Commission challenging a group of financial institutions’ efforts to create a new loophole. First, a little background:

On February 27, a group of private equity and investment bank lien holders of a collection of US power plants called MACH Gen filed for permission to restructure. The lien holders are the private equity firms Angelo Gordon (through its control of Silver Oak); Cayman Islands-based Solus, and Deutsche Bank.

Deutsche entered into a Total Return Swap with the private equity firm Energy Capital Partners which, among other things, gives Energy Capital Partners the ability to direct and control the way Deutsche’s MACH Gen board member votes. In their own words: “The Applicants do not concede that the indirect interest of ECP Polaris through the TRS equates to ownership or control of the voting securities of a public utility for the purposes of the Commission’s consideration of this . . . Application.”

So Energy Capital Partners, which will in fact control a board seat through its Total Return Swap with Deutsche Bank, is claiming at FERC that this Total Return Swap does not in fact constitute control.

Similarly, Citigroup, through an affiliate it created SOL, entered into a total return swap with Solus, providing Citi with 5.8% of the equity in MACH Gen. But this total return swap does NOT convey control over a board seat.

Determination that a Total Return Swap conveys control of a public utility is important, in part, because the U.S. Executive Branch, the Federal Reserve and Congress are actively engaged in a robust debate about defining and limiting control that certain financial institutions have over energy commodity assets. I first testified before Congress in 2008 about the dangers of financial institutions controlling energy assets, and testified again before the Senate in 2011.  The U.S. Senate Banking Committee held a January 2014 hearing, “Regulating Financial Holding Companies and Physical Commodities,” which included testimony by the Federal Reserve, FERC and the U.S. Commodity Futures Trading Commission.  The U.S. Federal Reserve in January 2014 announced an Advanced Notice of Rulemaking concerning its authority allowing certain financial institutions to control physical energy assets.

If FERC allows this Total Return Swap loophole to stand, Public Citizen predicts expanded use of such financial agreements to undermine various federal government efforts to regulate control over energy assets. Allowing this loophole will establish a dangerous precedent that will harm the public interest.

Tyson Slocum is Director of Public Citizen’s Energy Program. Follow him on Twitter @TysonSlocum

This weekend I was honored to speak at the 2014 Public Interest Environmental Law Conference at the University of Oregon along with my colleague Scott Nelson. My presentation is here, and it details how hundreds of millions of dollars were spent by SuperPACs and other dark money groups focusing on ads and other strategies to attack EPA regulations and/or promote expanded fossil fuel production. While some wealthy climate activists, like Tom Steyer, are trying to keep up with the Koch’s and other fossil fuel-backed spenders, it’s clear that the solution is not trying to match them in an arms race, but rather focus on building the grassroots. For example, the amazing activists protesting the Keystone XL pipeline have, despite no big money ad campaign, managed to force the President to frequently address what otherwise would be an obscure pipeline permitting process. This kind of inspiring feat is what Steyer should be building, rather than spending $100 million on pricey consultants, advertising agencies and TV stations. In the meantime, let’s support Public Citizen’s Democracy is for People campaign to get unregulated corporate money out of our political system.

Tyson Slocum is Director of Public Citizen’s Energy Program. Follow him on Twitter @TysonSlocum

TysonRTfrackingI did an interview with RT discussing the growing problems that chemicals used in fracking oil & natural gas pose to the environment and public safety. First, the Associated Press reports that there have been hundreds of complaints of water pollution from fracking, most from methane but some from the chemicals used in fracking. But this AP report only tells half the story, as it simply documents the different ways in which states handle and record complaints when folks call in to a hotline or send an email. That’s good info, but not nearly as important as sending scientists to investigate the complaint. And there’s the rub: when confirmed fracking pollution occurs, oil & gas companies quickly settle with the affected landowners, and, in return for providing cash and drinking water supplies, force families to sign non-disclosure agreements, forbidding them from even acknowledging that fracking pollution ocurred, or in some cases, requiring families to sign statements proclaiming that pollution didn’t occur. We challenged Jack Gerard on this point when he spoke at our offices earlier this year, and he denied knowing anything about these common non-disclosure agreements. In one famous case, the natural gas company forced parents to guarantee that their two young children would never speak about fracking pollution on their farm for the rest of their lives. The proliferation of these non-disclosure agreements distorts the policy debate because they interfere with the collection of data needed to draw conclusions about the saftety of fracking. It is unacceptable for the industry to continue to say “Fracking is safe, evidenced by the lack of water contamination proof!” at the same time they’re forcing familes to give up their right to talk about pollution (or in same cases, forcing the families to lie in order to qualify for the financial compensation). A simple solution is to disallow non-disclosure agreements that mask information on drilling contamination.

A second issue involves transportation hazards posed by fracking chemicals. On December 30, Warren Buffet’s BNSF line was hauling 78,000 barrels of oil on 104 rail cars from the Bakken Shale to a refinery in Missouri when it was hit by another BNSF train carrying soybeans headed in the opposite direction, derailed, and started a massive fire. I spoke to ABC World News Tonight about this tragedy, and, as my friend Steve Horn reports, the crude oil was more volatile and dangerous because it was laced with fracking chemicals absorbed by the oil during the production process. Indeed, the Pipeline & Hazardous Materials Safety Administration just issued a warning that fracked oil is more chemically explosive. And corrosive agents used in fracking that are then absorbed by the oil, such as hydrochloric acid, “which federal investigators suspect could be corroding the inside of rail tank cars, weakening them.” This means that moving fracked oil by pipelines won’t be safer, since the caustic oil could corrode pipelines as well. Big oil is opposing federal efforts to retrofit the safety of rail cars hauling crude oil.

railAs I’ve written before, the fracking boom is failing to deliver affordable, safe or sustainable energy for America.

Tyson Slocum is Director of Public Citizen’s Energy Program. Follow him on Twitter @TysonSlocum

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